Visa focuses on UK to expand mobile payment services in Europe

Thursday 21 February 2013 | 13:58 CET | Background

Visa is aiming for a mainstream launch of NFC based mobile payments in the UK during 2013, building on the positive mobile payments trial during the Summer Olympics in London in 2012. Although contactless payments via mobile and card have been introduced in the UK a few years ago, they have not yet taken off. This is mostly caused by the relative limited number of places where it can be used, as well as by security fears of consumers.

According to an article in Marketing Week Visa is planning to extend its NFC services as it aims to make the UK the leading contactless payments market in Europe. Based on a speech from Marc O’Brien, managing director of Visa UK & Ireland at a Westminster eForum event, Marketing Week reports that Visa aims for a mainstream launch of mobile payment services in the UK in 2013.  

During the Olympic Games in London in the summer of 2012 Visa, Lloyds Bank and Samsung trialled mobile payments at the Olympic Village. During the trial 700 VIPs were given NFC capable phones and throughout the ten week period 10,000 NFC transactions were made. According to Visa, contactless payments at Olympic venues over the Games period represented 10 percent of all on-site Visa transactions and 17 percent of all on-site Visa transactions under GBP20. Most of the contactless payments were made with contactless cards but mobiles were also used. Visa has accredited around 80 mobile phones as NFC capable, which means they can be used to store debit card or credit card credentials. According to mobilennewscwp.com Visa is also able to make the iPhone NFC capable, although this will require an accessory solution, such as a smartphone case containing the NFC chip and Secure Element.     

The feedback from the Olympic trial was positive and Visa want to build on that to make the UK the number one mobile payment player in Europe. At the moment the UK is surpassed by Poland in terms of take-up of contactless payments, across Visa’s European footprint according to O’Brien. He also said that Visa estimated that currently around 17 percent of mobile phones in the UK are NFC enabled, but that Visa expects that percentage to grow to around 70 percent in four years’ time.   

The UK has been at the forefront of NFC payments, both via mobile and contactless cards, as several players and especially Barclays Bank have been active players promoting NFC since a number of years. According to contactless.info at the end of December 2012 there were 143,000 contactless terminals installed across the UK while 31 million cards with contactless functionality had been issued.. However, as many of the roughly 190,000 retail outlets in the UK have several terminals in one outlet, the total number of payment terminals is likely to be at least four to five times as many. Recently Visa announced that they have extended their co-operation with Boots regarding contactless payments, with Boots expanding the number of stores which are capable of handling contactless payments to cover all their stores within the next few years.  

Unfortunately no information was provided on how Visa intends to entice retailers to improve the access to and the marketing of NFC based mobile payments. Despite those 143,000 contactless terminals in place across the UK, it will require the inclusion of major retailers such as Marks and Spencer, Tesco and Sainsbury before NFC based mobile payment could really be called mainstream. Nor was there any insight into how users will be encouraged to make regular use of NFC based mobile payments, as during the Olympics the use averaged at just over one transaction per week, and surely Visa will not consider that to be a viable business model. Lastly O’Brien said that Visa is currently working with Android manufacturers and mobile operators Telefonica and Vodafone to establish security standards for NFC based mobile payments. Although Telefonica and Vodafone together account for just over half of the mobile customers in the UK, again it will be more difficult to obtain mainstream status if the other two MNOs, EE and 3, are not also cooperating with Visa’s mobile payments push and that increases the risk of competing services being launched by EE and/or 3.  

The above is corroborated by a recent study from ICM Research where they looked at why contactless payments have grown since they were launched but have not become widely used. They found that the vast majority of consumers in the UK are aware of contactless payment cards but not everyone knows if they have one in their wallet or not. The two main reasons for not using them are fears about the level of security of the card as well as the relatively few places where they can be used. Although the ICM Research talks about contactless payment cards, we believe that the above mentioned reasons also apply to mobile contactless payments. 

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